Pipeline Trading Systems, which was fined $1 million by the nation’s top regulator in October, has changed its name to Aritas Securities. The announcement came this morning.
Jay Biancamano, named executive chairman in November, said Aritas Securities would focus solely on three products: AlphaPro, which recommends trade execution strategies based on past experience; its Algorithm Switching Engine, which attempts to predict market moves and allows traders to switch strategies in anticipation; and the Block Market, an electronic venue for trading in large blocks of stock.
Biancamano came to Aritas from Liquidnet, the top electronic venue globally to trade stocks in block size. Biancamano led its global execution strategy and the launch of Liquidnet H2O, its streaming liquidity dark pool.
After the fine was announced, Pipeline immediately halted operation of Milstream Securities, the brokerage that landed Pipeline in hot water last year with the Securities and Exchange Commission.
Pipeline agreed to pay $1 million to settle charges that it failed to disclose Milstream’s role in providing most of the liquidity in Pipeline’s U.S. dark pool, the Block Market. Clients thought they were interacting with other buyers and sellers—natural liquidity—while in reality they were trading against Milstream, which took positions as a principal.
Aritas Securities has completed a new version of Alpha Pro, a product which recommends trade execution strategies upon order arrival based on real-time analysis of comparable past orders and outcomes and provides traders with the major factors that drive the strategy recommendations. "The popularity of Alpha Pro was growing rapidly prior to Pipeline’s SEC agreement," Biancamano said. "We believe we can regain that momentum and build on it in 2012."
Chairman Alfred Berkeley and Chief Executive and founder Fred Federspiel left Pipeline Trading, shortly after the SEC settlement. Each agreed to pay a $100,000 fine to the SEC for their role.
According to the SEC complaint in the matter, Pipeline did disclose in most of its subscriber agreements that unspecified affiliates could be trading in the dark pool, but it did not disclose the role that affiliate played in providing liquidity.
In the first four months after Pipeline launched, the affiliate, initially known as Exchange Advantage, was a party to 97.5 percent of all transactions on the dark pool, the SEC said. From the launch until the end of 2009, the affiliate allegedly participated in a total of about 80 percent of all trades.
Tom Steinert-Threlkeld is editorial director of Securities Technology Monitor.
Michael Scotti, Traders Magazine’s editorial director, contributed to this story.
